2017 (10) TMI 1141 - AT - Income Tax

Tribunal rules HUFs not eligible for deduction under section 54B

The Tribunal dismissed the appeals, ruling that Hindu Undivided Families (HUFs) were not eligible for the deduction under section 54B for the assessment ... LTCG - exemption u/s 54B - scope of amendment - making HUF eligible for claiming exemption u/s. 54B - retrospective or prospective - Held that:- As in view of the plain reading of section prior to amendment and in the light of ratio laid down in the case of Commissioner of Income Tax Vs. G.K. Devarajulu (1990 (12) TMI 36 - MADRAS High Court) we hold that the assessee being HUF is not eligible for claiming exemption u/s. 54B of the Act during the assessment year under appeal. Accordingly, the appeal of the assessee is dismissed. The issue raised in present appeal is identical to the one adjudicated by Hon’ble Madras High Court. There is no scope left for the Tribunal to further interpret the provisions of the section on this aspect or to deliberate on retrospective applicability of amendment to section 54B brought in by the Finance Act 2012. The ld. AR has not brought to our knowledge any judgment of Hon’ble Jurisdictional High Court or the Hon’ble Apex Court suggesting retrospective applicability of the amended provisions of section 54B of the Act. - Decided against assessee. Issues Involved:1. Eligibility of HUF for claiming deduction under section 54B of the Income Tax Act, 1961.2. Retrospective applicability of the amendment to section 54B by the Finance Act, 2012.Detailed Analysis:1. Eligibility of HUF for claiming deduction under section 54B of the Income Tax Act, 1961:The primary issue in the appeals was whether a Hindu Undivided Family (HUF) is eligible to claim deduction under section 54B of the Income Tax Act, 1961, for the assessment year 2007-08. The assessee, an HUF, had claimed a deduction under section 54B for the long-term capital gain arising from the sale of agricultural land. The Commissioner of Income Tax (Appeals) rejected the claim, and the assessee appealed to the Tribunal.The Tribunal noted that prior to the amendment by the Finance Act, 2012, section 54B only allowed individuals to claim the deduction. The amendment, effective from 01-04-2013, included HUFs within the scope of section 54B. The Tribunal referred to the decision of the Hon'ble Madras High Court in the case of Commissioner of Income Tax Vs. G.K. Devarajulu (191 ITR 211), which held that the provisions of section 54B did not apply to HUFs before the amendment. The High Court emphasized that the language of section 54B, which referred to 'the assessee or a parent of his,' indicated that only individuals were contemplated, as the term 'parent' could not logically apply to an HUF.The Tribunal concluded that, based on the plain reading of the section and the High Court's interpretation, the assessee, being an HUF, was not eligible for the deduction under section 54B for the assessment year 2007-08. Consequently, the appeal was dismissed.2. Retrospective applicability of the amendment to section 54B by the Finance Act, 2012:The second issue was whether the amendment to section 54B by the Finance Act, 2012, which included HUFs, should be applied retrospectively. The assessee argued that since section 54B was a beneficial provision, the amendment should be read as having retrospective effect. The assessee cited the decisions of the Hon'ble Supreme Court in Commissioner of Income Tax Vs. Alom Extrusions Ltd. (319 ITR 306) and Commissioner of Income Tax Vs. Podar Cement (P) Ltd. (226 ITR 625), which held that provisions introduced to remedy unintended consequences should be applied retrospectively.However, the Tribunal found that there was no judgment from the Hon'ble Jurisdictional High Court or the Hon'ble Apex Court suggesting that the amendment to section 54B should be applied retrospectively. The Tribunal also noted that the Hon'ble Madras High Court, in the case of Commissioner of Income Tax Vs. G.K. Devarajulu, had explicitly held that the benefit of section 54B was not intended for HUFs prior to the amendment. The Tribunal, therefore, concluded that the amendment could not be applied retrospectively and upheld the order of the Commissioner of Income Tax (Appeals).Conclusion:The Tribunal dismissed the appeals of both assessees, holding that HUFs were not eligible for the deduction under section 54B for the assessment year 2007-08, and the amendment to section 54B by the Finance Act, 2012, could not be applied retrospectively. The Tribunal's decision was based on the plain reading of the section and the interpretation provided by the Hon'ble Madras High Court. The appeals were dismissed, and the order was pronounced on August 24, 2017.